RCEP: India readies tougher rules to curb dumping

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Published: September 23, 2019 2:38:48 AM

The move is aimed at allaying the domestic industry’s fears that any free trade agreement with China through RCEP (Beijing is a member) will result in massive dumping of highly-subsidised items, mostly diverted due to the ongoing trade war.

But at the same time, the proposals suggest India’s greater willingness now than earlier to clinch the RCEP deal.But at the same time, the proposals suggest India’s greater willingness now than earlier to clinch the RCEP deal.

India is preparing for any “irrational spike” in imports ahead of a potential deal at the 16-nation Regional Comprehensive Economic Partnership (RCEP) negotiations in November, with commerce and industry minister Piyush Goyal having cleared critical changes in anti-dumping, countervailing and safeguard rules to better protect the domestic industry.

As part of the proposed changes, lesser duty rules (LDR) — under which authorities typically impose import duties at a lower level than the margin of dumping if this is adequate to remove “injury” to the domestic industry — would be scrapped, a source told FE. The abolition will allow authorities to slap anti-dumping and countervailing duties to the full extent of dumping and illegal subsidies enjoyed by foreign exporters, respectively.

The move is aimed at allaying the domestic industry’s fears that any free trade agreement with China through RCEP (Beijing is a member) will result in massive dumping of highly-subsidised items, mostly diverted due to the ongoing trade war.

But at the same time, the proposals suggest India’s greater willingness now than earlier to clinch the RCEP deal.

Similarly, the government will also introduce tariff rate quota in safeguard rules, which will provide greater flexibility to it in operating and administering the mechanism whenever required. Usually, the tariff rate quota allows stipulated quantity of imports at a lower duty and once the ceiling is breached, higher impost kicks in on the additional imports.

The changes would be notified by the revenue department of the finance ministry soon after legal vetting, the source said. The new provisions are WTO-compliant, the source claimed.

The government will likely introduce anti-circumvention provision in the countervailing duty rules. Circumvention typically takes place when an exporting nation seeks to get around its WTO commitments (such as the pledge to limit farm export subsidies) or evade anti-dumping or countervailing duties of an importing country, among others, to push its products that are priced much cheaper through illegal dole-outs.

The RCEP is a proposed mega trade pact between the 10 Asean members and their six FTA partners, namely Australia, China, India, Japan, South Korea and New Zealand. According to initial estimates, it accounts for 25% of global gross domestic product, 30% of trade, 26% of foreign direct investment flows and 45% of population.

Earlier this month, trade ministers from the RCEP grouping pledged to address any contentious issue and clinch a deal this year.

Recently, Goyal said India was in favour of early conclusion of the RCEP pact if its interests were protected. Simultaneously, he added that one or two domestic industries couldn’t hijack FTA talks to suit them and that their interests would be protected to the maximum extent possible.

The minister also sought to play down domestic resistance to RCEP, saying the industry is vertically split in its opposition. While some in the pharmaceutical sector see vast opportunities for exports if they get credible market access in China through the RCEP, some others, notably the steel and dairy industries, are opposed to the deal for fears of cheaper dumping, especially from China and New Zealand, respectively. MSMEs, too, have been opposing any RCEP deal.

However, many consuming industries, including bulk buyers of steel, have endorsed the mega trade deal.

“It’s all about balancing conflicting interests, both internal and external,” another source said. Earlier this month, the government also announced a slew of steps to help exporters, including a Rs 50,000-crore scheme to replace its existing flagship export scheme and easier and cheaper credit for them.

Even without the deal, India’s merchandise trade deficit with the RCEP grouping hit $105 billion in FY19 (roughly 60% of its total deficit). China alone contributed as much as $53.6 billion. New Delhi has now linked meaningful market access from Beijing in key sectors — including IT, pharma and agriculture — to its endorsement of the RCEP deal.

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